Anhui Golden Seed Winery Co., Ltd. (SHSE:600199) Might Not Be As Mispriced As It Looks

It's not a stretch to say that Anhui Golden Seed Winery Co., Ltd.'s (SHSE:600199) price-to-sales (or "P/S") ratio of 5.5x right now seems quite "middle-of-the-road" for companies in the Beverage industry in China, where the median P/S ratio is around 5.1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Anhui Golden Seed Winery

How Anhui Golden Seed Winery Has Been Performing

With revenue growth that's inferior to most other companies of late, Anhui Golden Seed Winery has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think Anhui Golden Seed Winery's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Anhui Golden Seed Winery's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Anhui Golden Seed Winery's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 14%. The latest three year period has also seen a 28% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 27% as estimated by the five analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 16%, which is noticeably less attractive.

With this information, we find it interesting that Anhui Golden Seed Winery is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Final Word

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Despite enticing revenue growth figures that outpace the industry, Anhui Golden Seed Winery's P/S isn't quite what we'd expect. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Before you settle on your opinion, we've discovered 1 warning sign for Anhui Golden Seed Winery that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com